Things to Consider Before Buying a Home

Determining what your long-term goals are and how owning a home fits in with those goals are crucial in homeownership. Narrowing down your big-picture homeownership goals will point you in the right direction. Here are some questions to consider before buying a home in the Philippines:

1. What is my financial health?

Before clicking through pages of online listings or falling in love with your dream home, do a serious audit of your finances. You need to be prepared for both the purchase and the ongoing expenses of a home. The outcome of this audit will tell you whether you’re ready to take this big step, or if you need to do more to prepare. Follow these steps:

a. Check at your savings. Have an emergency savings with three to six months of living expenses. Don't consider buying a home without an emergency saving account. Buy a home entails considerable upfront costs, including the down payment and closing costs. Some developers incorporate the closing cost in the purchase. Clarify this with your real estate agent. You need money put away not only for those costs but also for your emergency fund. Lenders will require it.

b. Review your spending. You need to know exactly how much you’re spending every month—and where it’s going. This calculation will tell you how much you can allocate to a mortgage payment. Make sure you account for everything—utilities, food, car maintenance and payments, student debt, clothing, kids’ activities, entertainment, retirement savings, regular savings, and any miscellaneous items.

c. Check your credit. Generally, to qualify for a home loan, you’ll need good credit, a history of paying your bills on time. Banks and lenders these days generally prefer to limit housing expenses (principal, interest, taxes, and homeowners insurance) or disposable income to about 30% of the borrowers’ monthly gross income, though this figure can vary widely, depending on the local real estate market.

2. What type of home will best suit my needs?

You have a number of options when purchasing a residential property: a traditional single-family home, a duplex, a townhouse, a condominium, or a multifamily building with two to more units. Each option has its pros and cons, depending on your homeownership goals, so you need to decide which type of property will help you reach those goals. You can save on the purchase price in any category by choosing a resale or a fixer-upper home, but be forewarned: The amount of time, sweat equity, and money required to turn a resale or a fixer-upper into your dream home might be a lot more than you bargained for.

3. What specific features do I want for my ideal home?

While it’s good to retain some flexibility in this list, you’re making perhaps the biggest purchase of your life, and you deserve to have that purchase fit both your needs and wants as closely as possible. Your list should include basic desires, like size and neighborhood, all the way down to smaller details like bathroom layout and a kitchen fitted with durable appliances. Scanning real estate websites can help you get a sense of the pricing and availability of properties offering the features that are most important to you.

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4. Can I qualify for a mortgage?

Before you start shopping, it’s important to get an idea of how much a bank or developer will give you to purchase your first home. You may think you can afford a particular home, but banks or developers may think you can only qualify for a certain purchase amount. Factors like how much other debt you have, your monthly income, and how long you’ve been at your current job are to be considered. In addition, many real estate agents will not spend time with clients who haven’t clarified how much they can afford to spend.

Make sure to get pre-approved for a loan before placing an offer on a home. In many instances, sellers will not even entertain an offer that’s not accompanied by a mortgage pre-approval. You do this by applying for a mortgage and completing the necessary paperwork. It is beneficial to shop around for a bank or a lender and to compare interest rates and fees by using a tool like a mortgage calculator or Google searches.

5. Can I actually afford a home?

Sometimes a bank will give you a loan more than you really want to pay for. Just because a bank says it will lend you a certain amount doesn’t mean that you should actually borrow that much. Many first-time homebuyers make this mistake and end up “house-poor” with little left after they make their monthly mortgage payment to cover other costs, such as clothing, utilities, vacations, entertainment, or even food.

In deciding how big a loan to actually take, you’ll want to look at the house’s total cost, not just the monthly payment. Consider how high the property taxes are in your chosen neighborhood, how much homeowners insurance will cost, how much you anticipate spending to maintain or improve the house, and how much your closing costs will be.

6. Who will help me find a home and guide me through the purchase process?

A real estate agent will help you locate homes that meet your needs and are in your price range, then meet with you to view those homes. Once you’ve chosen a home to buy, these professionals can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork. A good real estate agent’s expertise can protect you from any pitfalls that you might encounter during the process. Most agents receive a commission, paid from the seller’s proceeds.

DC East Central Homes agents are masters of this craft. With us, you are first. Contact us now for inquiries and assistance at sales@dceastcentralhomes.com.